Shri Prahladray M. Shah, Nadiad V. The ACIT, Kheda Cicle, Nadiad

ITA 1787/AHD/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3832 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 1999-2000
• Appeal Filed On: 17-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G C PIPARA
• Keywords: Principle of natural justice; Peak credit

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ITA NOS.1785, 1787, 1789, 1791 AND 1793/AHD/2015 ( / ASSESSMENT YEARS : 1998-99, 1999-2000, 2000-01, 20 01-02 AND 2002-03 RESPECTIVELY) PRAHLADRAY M. SHAH 23, SHYAMKUNJ SOCIETY B/H. VAISHALI CINEMA NADIAD, DISTRICT KHEDA / VS. THE ACIT KHEDA CIRCLE NADIAD ./ ./ PAN/GIR NO. : AGTPS 8575 P ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI G. C. PIPARA, AR / RESPONDENT BY : SHRI VIDHYUT TRIVEDI, SR.DR / DATE OF HEARING 11/02/2020 !'# / DATE OF PRONOUNCEMENT 21/02/2020 / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER: THESE FIVE APPEALS HAVE BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LD.COMMISSIONER OF INCOME TAX (APPEALS)2, VADODARA [CIT(A) IN SHORT] VIDE APPEA L NO.CAB/(A)- 2/324, 331, 326, 327 & 328 /14-15 DATED 27/08/20 14 RELEVANT TO ASSESSMENT YEARS (AYS) 1998-99 TO 2002-03 RESPECT IVELY. 2. SINCE IN ALL THESE APPEALS OF THE ASSESSEE ISSU ES ARE COMMON, BUT AMOUNTS AND ASSESSMENT YEARS ARE DIFFERENT, THEREFO RE FOR THE SAKE OF BREVITY, WE WOULD LIKE TO DISPOSE OF THESE FIVE APP EALS BY WAY OF A COMMON ORDER. ITA NOS.1785,1787,1789,1791 & 1793/AHD/2015 PRAHLADRAY M.SHAH VS. ACITVS. ASST.YEARS 1998-99 TO 2002-03 - 2 - 3. AS A LEAD CASE, WE WOULD LIKE TO TAKE UP ITA NO.1785/AHD/2015 FOR AY 1998-99, WHEREIN ASSESSEE HAS TAKEN FOLLOWING GR OUNDS OF APPEAL: THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN PAS SING THE IMPUGNED APPELLATE ORDER IN A MECHANICAL MANNER REPEATING TH E STAND TAKEN BY HIS PREDECESSOR IN THE APPELLATE ORDERS WHICH STOOD SET -ASIDE FOR DECISIONS AFRESH WITHOUT CONSIDERING THE ELABORATE SUBMISSIONS AND A RGUMENTS FILED DURING THE COURSE OF SET-ASIDE APPEAL THUS RENDERING THE WHOLE PROCESS OF SETTING ASIDE THE EARLIER APPELLATE ORDERS BY THE HON'BLE ITAT AS FUT ILE AND WASTED. THE IMPUGNED ORDER THUS REQUIRES TO BE HELD AS BAD IN L AW, THE SAME BEING IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND EQUITY. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.2,50,000/- OUT OF TOTAL ADDITION OF RS.35,27,200/- MADE BY THE A.O. ON ACCOUNT OF NON-OPERATIVE FINANCE. THE SAID ADDITION BEING BASED ON ESTIMATES AND THE BANK ACCOUNT IN RESPECT OF WHICH THE SAID ESTIMATE IS MADE HAVING BEEN DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT PRODUCED BEFORE THE A.O. IN THE REMAND PROCEEDINGS AND ALSO IMPOUNDED BY THE A.O., THE IMPUGNED ESTIMATED ADDITION OF RS.2,50,000/- BE ING BASED WITHOUT ANY MATERIAL IN SUPPORT THEREOF REQUIRES TO BE DELETED. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.4,04,38,563/- ON ACCOUNT OF OPERATIVE FINANCE WITHOUT PROPER CONSIDERATION AND APPRECIATION OF THE FACTS AND SUB MISSIONS FILED. IN VIEW OF FACTS OF THE CASE AND SUBMISSIONS FILED, THE IMPUGN ED ADDITION OF RS.4,04,38,563/- TO THE EXTENT OF TRANSACTIONS APPE ARING IN FOUR UNACCOUNTED BANK ACCOUNTS ADMITTED BY THE APPELLANT REQUIRES TO BE RESTRICTED ONLY TO THE AMOUNT OF PEAK CREDIT OF SUCH FOUR ACCOUNTS. 3.1 THE LEARNED CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN REJECTING THE APPELLANT'S PLEA FOR TAXING THE PEAK CREDIT IN RESPECT OF TRANSACTIONS APPEARING IN FOUR UNACCOUNTED BANK ACCOUNTS ADMITTE D BY THE APPELLANT WHILE WRONGLY OBSERVING THAT THE THEORY OF PEAK CREDIT IS APPLICABLE ONLY IN CASE OF CASH DEPOSITS AND NOT CHEQUE DEPOSITS. 3.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE A.O. HIMSELF ON IDENTICAL FACTS WHILE MAKING ADDITIONS IN RESPECT O F UNACCOUNTED BANK ITA NOS.1785,1787,1789,1791 & 1793/AHD/2015 PRAHLADRAY M.SHAH VS. ACITVS. ASST.YEARS 1998-99 TO 2002-03 - 3 - ACCOUNTS IN CASE OF OTHER FAMILY MEMBERS OF THE APP ELLANT HAS TAXED ONLY PEAK CREDIT EVEN IN CASE OF CHEQUE DEPOSITS. THUS, IN ABSENCE OF ANY CHANGE IN FACTS, THE LEARNED A.O. WAS NOT JUSTIFIED IN TAXING ONLY THE CREDITS APPEARING IN THE BANK ACCOUNTS. THE LEARNED CIT(A) WAS ACCORDING LY NOT JUSTIFIED IN CONFIRMING THE SAID ACTION OF THE A.O. 3.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE APPELLANT BEING ENGAGED IN THE BUSINESS OF FINANCING, BOTH THE DEBIT AND CREDIT ENTRIES APPEARING IN THE UNACCOUNTED BANK ACCOUNTS REQUIRES TO BE CONSIDERED SINCE THE DEBITS REPRESENTS FINANCE GIVEN AND CREDITS REP RESENT FINANCE RECEIVED BACK. THE APPELLANT STATES THAT IN ABSENCE OF DETAI LS IN RESPECT OF EACH ENTRY, THE ONLY LOGICAL APPROACH WAS TO TAX THE PEAK CREDI T OF SUCH BANK ACCOUNTS WHICH COULD BE SAID TO BE THE MAXIMUM AMOUNT ROTATE D BY THE APPELLANT IN HIS FINANCING BUSINESS DURING THE YEAR AND THE REASONAB LE INCOME EARNED THERE FROM. 3.4 THE LEARNED CIT(A) HAS FURTHER ERRED IN NOT APPRECIATING THE FACT THAT THE CREDITS APPEARING IN THE BANK ACCOUNTS PERTAIN TO ADVANCES GIVEN IN EARLIER YEARS RECEIVED BACK DURING THE YEAR WHICH CANNOT BE TREATED AS INCOME FOR THE YEAR. THAT APART, THE INTER BANK TRANSFER ENTRIES H AVING NOT BEEN ELIMINATED WHILE WORKING OUT THE INCOME ONLY ON THE BASIS OF C REDITS APPEARING IN THE UNACCOUNTED BANK ACCOUNTS, THE IMPUGNED ADDITION OF RS.4,04,38,563/- ON ACCOUNT OF OPERATIVE FINANCE CONFIRMED BY THE LEARN ED CIT(A) IS EVEN OTHERWISE INCORRECT AND ILLOGICAL. 3.5 THE LEARNED CIT(A) ALSO FAILED TO CONSIDER AND APPRECIATE THE FACT THAT IN AS MUCH AS CHEQUE RETURN ENTRIES AGGREGATING TO RS.31,22,200/- FOR THE YEAR IN DISPUTE AS APPEARING IN THE CREDIT SIDE OF THE 4 UNACCOUNTED BANK ACCOUNTS AS QUANTIFIED BY THE APPELLANT CANNOT BE T AXED, SINCE NO AMOUNT IS EITHER RECEIVED OR REALIZED BY THE APPELLANT IN RES PECT OF SUCH CHEQUES WHICH WERE DEPOSITED IN THE BANK ACCOUNTS BUT RETURNED BY THE BANK. THE AMOUNT OF CHEQUE RETURN ENTRIES THUS REQUIRES TO BE EXCLUDED FROM THE ADDITION MADE BY THE AO. 3.6 THE LEARNED CIT(A) FURTHER FAILED TO CONSID ER AND APPRECIATE THE FACT THAT THE INVESTMENTS MADE AND APPLICATION OF FUNDS EVEN AS PER ADDITIONS MADE BY THE A.O. [WITHOUT PREJUDICE TO CORRECTNESS OF THE SAME], ARE MUCH LESS THAN THE AGGREGATE AMOUNT OF PEAK CREDIT WORKE D OUT BY THE APPELLANT THIS FACT ITSELF JUSTIFIES THE THEORY OF PEAK CREDI T SINCE THE A.O. HAS NOT BROUGHT ON RECORD ANY OTHER MATERIAL OR EVIDENCE IN SUPPORT OF ANY OTHER INVESTMENTS, ITA NOS.1785,1787,1789,1791 & 1793/AHD/2015 PRAHLADRAY M.SHAH VS. ACITVS. ASST.YEARS 1998-99 TO 2002-03 - 4 - WHICH ARE OUT OF BOOKS OF ACCOUNT. ACCORDINGLY, TAX ING THE ENTIRE CREDITS APPEARING IN THE BANK ACCOUNTS AS INCOME OF THE APP ELLANT IS WHOLLY ILLOGICAL AND BAD IN LAW. 3.7 THE LEARNED CIT(A) ALSO FAILED TO CONSIDER, APPRECIATE AND ADJUDICATE UPON THE APPELLANT'S ARGUMENT THAT THERE ARE DEBIT AND CREDIT ENTRIES IN THE BANK ACCOUNTS BOTH IN CASH AS WELL AS BY WAY OF CHE QUES AND AS PER THE AO'S OWN WORKING ON PAGE NO. 128 OF THE ASSESSMENT ORDER , THE CASH AVAILABLE TO MAKE FRESH DEPOSITS DURING THE YEAR RAFTER CONSIDER ING ALL ENTRIES IS TO THE TUNE OF RS.1,64,39,900/- AND HENCE ADDITION TO THE SAID EXTENT IS WHOLLY UNJUSTIFIED AND UNWARRANTED. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO RECOMPUTE THE ESTIMATED AND HYPOTHETICAL ADDITION OF RS.24,65,95 /-ON ACCOUNT OF ALLEGED INTEREST INCOME ACCRUED ON NON-OPERATIVE AND OPERATIVE FINANCE FOR A PERIOD OF 6 MONTHS @ 15%. THE APPELLANT STATES TH AT THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE A.O. TO WORK OUT THE INT EREST @ 9% ON THE ACTUAL DAY-TO-DAY CASH BALANCE AND NOT ON THE CLOSING CASH BALANCE WHICH IS WHOLLY ILLOGICAL. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.L,75,000/- ON ACCOUNT OF INVESTMENT IN FDR'S OUT OF INCOME FRO M UNDISCLOSED SOURCES. IN VIEW OF FACTS OF THE CASE, THE SAID INVESTMENT IN FOR REQUIRES TO BE TREATED AS MADE OUT OF OR COVERED BY THE FUNDS AVAILABLE ON ACCOUNT OF INTANGIBLE ADDITIONS MADE AND CONFIRMED ON ACCOUNT OF OPERATIVE FINANCE FOLLOWING THE SETTLED PRINCIPLE OF TELESCOP ING. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, MO DIFY OR DELETE ANY OF THE ABOVE GROUNDS AS WELL AS TO SUBMIT ADDITIONAL GROUN DS AT THE TIME OF HEARING OF THE APPEAL. 4. FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILE D COMPLAINTS U/S.138 OF THE NEGOTIABLE INSTRUMENTS ACT FOR DISHONOUR OF CHEQUES AGAINST 14 PERSONS IN WHICH IT WAS NOTICED THAT THE ASSESSEE H AD ADVANCED TOTALLING TO RS.78,90,000/- DURING THE PREVIOUS YEAR RELEVAN T TO THE AYS 1998-99 TO 2001-02. THESE FACTS WERE ALSO CONFIRMED BY THE ASSESSEE DURING THE ITA NOS.1785,1787,1789,1791 & 1793/AHD/2015 PRAHLADRAY M.SHAH VS. ACITVS. ASST.YEARS 1998-99 TO 2002-03 - 5 - COURSE OF THE STATEMENT U/S.131(1A) OF THE ACT ON 2 5/12/2005 BEFORE THE DY.DIRECTOR OF INCOME-TAX (INV.), BARODA. 4.1. ON THE OTHER HAND, NONE OF THE PERSON HAS NAME D IN THE COMPLAINTS U/S.138 OF THE NEGOTIABLE INSTRUMENTS ACT WERE SHOW N BY THE ASSESSEE AS SUNDRY DEBTOR IN HIS BALANCE-SHEET. ON THE BASIS O F THAT, LD. ASSESSING OFFICER (AO) IN THE AY 1998-99 MADE ADDITION OF RS. 7,87,120/-. THEREAFTER, IN APPEAL, LD.CIT(A) COMPUTED THE INCOM E OF THE ASSESSEE AT RS.1,19,120/- AS PER ORDER DATED 16/08/2002. 4.2. THEREAFTER, ASSESSEE PREFERRED APPEAL BEFORE T HE ITAT AND AT THE TIME OF PASSING THE IMPUGNED ORDER, APPEAL OF THE A SSESSEE WAS PENDING BEFORE THE ITAT. 5. THE COORDINATE BENCH PASSED A COMBINED ORDER IN ASSESSEES OWN CASES IN ITA NOS.1785 TO 1796/AHD/2015 FOR AYS 199 8-99 TO 2003-04 DATED 30/01/2018 WITH THE FOLLOWING OBSERVATION: 23(A). IT FURTHER COMES TO OUR NOTICE THAT THE ASS ESSING OFFICER HAD ADDED NON-OPERATIVE FINANCE AMOUNT OF RS.35,27,200/ -, RS.29,25,000/-, RS.34,05,600/-, RS.54,96,700/-, RS.13,97,000/- & RS .55,19,000/- IN ASSESSMENT YEARS 1998-99 TO 2003-04 WHEREAS THE CIT(A) HAS CON FIRMED THE SAME TO THE TUNE OF RS.2.5LACS IN SAID FIRST ASSESSMENT YEAR, R S.5LACS EACH IN NEXT FOUR ASSESSMENT YEARS AND PROCEEDED TO DELETE ENTIRE FIG URE IN LAST ASSESSMENT YEAR; RESPECTIVELY. THE SAME SUFFICIENTLY INDICATES THAT THE IMPUGNED ESTIMATION RATE IN ALL ASSESSMENT YEARS IS NON UNIFORM. WE THEREFO RE DEEM IT APPROPRIATE IN THIS BACKDROP OF FACTS THAT THE ASSESSING OFFICER S HALL FINALIZE CONSEQUENTIAL COMPUTATION ADOPTING THE RATE AS IN LOWER APPELLATE PROCEEDINGS IN ASSESSMENT ITA NOS.1785,1787,1789,1791 & 1793/AHD/2015 PRAHLADRAY M.SHAH VS. ACITVS. ASST.YEARS 1998-99 TO 2002-03 - 6 - YEAR 1998-99 ONLY AS PERTINENT TO THE INSTANT ISSUE IN ALL CORRESPONDING YEARS. THE ASSESSEE SHALL FILE CONSEQUENTIAL COMPUTATION B EFORE THE ASSESSING OFFICER AS PER LAW. 6. THE COORDINATE BENCH OF ITAT HAS CONFIRMED A SU M OF RS.2.50 LAKHS IN THE FIRST YEAR, I.E. FOR AY 1998-99 VIDE ORDER DATED 30/01/2018. THE ADDITION CONFIRMED BY LD.CIT(A) OF RS.2,50,000/ - IS UPHELD AND ACCORDINGLY IN PARITY WITH COORDINATE BENCH ORDER, THE APPEAL OF THE ASSESSEE IS DISMISSED. 7. IN ITA NO.1787/AHD/2015 FOR AY 1999-2000, OUT OF THE ADDITION OF RS.5 LAKHS, THE ADDITION OF RS.2.00 LAKHS IS CON FIRMED AND APPELLANT GETS RELIEF OF RS.3 LAKHS. ACCORDINGLY, THIS APPEA L IS PARTLY ALLOWED. 8. IN ITA NO.1789/AHD/2015 FOR AY 2000-01, OUT OF T HE ADDITION CONFIRMED OF RS.5 LAKHS, THE ADDITION OF RS.2,38,00 0/- IS CONFIRMED AND APPELLANT GETS RELIEF OF RS.2,62,000/-. THUS, APPE AL IS PARTLY ALLOWED. 9. IN ITA NO.1791/AHD/2015 FOR AY 2001-02, ADDITION OF RS.5 LAKHS CONFIRMED BY THE CIT(A). THUS, IN PARTY WITH THE I TAT ORDER APPELLANT GETS RELIEF OF RS.1,20,000/- AND ADDITION OF RS.3,8 0,000/- IS CONFIRMED. THUS, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 10. IN ITA NO.1793/AHD/2015 FOR AY 2002-03, THE ADDITION OF RS.5 LAKHS WAS CONFIRMED BY THE CIT(A), THE ADDITION OF RS.1,30,000/- IS ITA NOS.1785,1787,1789,1791 & 1793/AHD/2015 PRAHLADRAY M.SHAH VS. ACITVS. ASST.YEARS 1998-99 TO 2002-03 - 7 - CONFIRMED AND APPELLANT GETS PART RELIEF OF RS.3 ,70,000/-. THUS, ON THE BASIS OF COORDINATE BENCH ORDER, APPEAL OF THE ASS ESSEE IS PARTLY ALLOWED. 11. IN THE RESULT, ALL FIVE APPEALS FILED BY THE A SSESSEE OUT OF SAID APPEAL ITA NO.1785/AHD/2015 FOR AY 1998-89 IS DISM ISSED AND REST OF THE FOUR APPEALS ARE PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 21/02/2020 SD/- SD/- ( WASEEM AHMED ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD; DATED 21/ 02 /2020 &.., .(.. / T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-2, VADODARA 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 20.2.20 ( DICTATION-PAD 9- PAGES ATTACHED AT THE END OF T HIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.2.20 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.21.2.20 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.2.20 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER